Channels of Size Adjustment and Firm Performance
We use unique business register data for the United Kingdom to investigate the effects of different forms of firm expansion and contraction on firm-level performance indicators such as wages and productivity. We distinguish between adjustment of employment and turnover at existing establishments, expansions and contractions taking place via greenfield investment and disinvestment, and via acquisitions and sell-offs. We show that the choice of adjustment channel has important implications for the evolution of firm-level performance indicators. In terms of aggregate importance, we demonstrate that the two external adjustment forms (greenfield and M&A) account for at least 50% of the changes in aggregate wages, profits and productivity associated with firm expansions and contractions.
|Date of creation:||14 Dec 2011|
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